After Sotheby’s public disclosure last Wednesday of how much it is relying on guarantees in general and irrevocable bids in particular, Christie’s on Friday responded to my question about its own guarantee portfolio. Its figures suggest that Christie’s is relying on pre-orchestrated bids even more heavily than is Sotheby’s: “Overall,” a Christie’s spokesperson told me, “we have 46 guaranteed lots across the two evening sales. Of those, 43 have been backed by third parties.” The comparable figures at Sotheby’s are 36 and 20, respectively.
Here’s a star lot from tonight’s Impressionist/Modern sale at Christie’s (starting at 7 p.m.), which is backed by an irrevocable bid:
Presale estimate: $35-50 million
Photo by Lee Rosenbaum
[Note: Kelly Crow reports somewhat different figures for Sotheby’s in her Wall Street Journal preview of the upcoming auctions. I’m seeking clarification from Sotheby’s.]
In Christie’s lingo (as I previously explained here), a “third-party guarantee” is the same as an “irrevocable bid” at Sotheby’s—an amount high enough to buy the work (at or above the consignor’s minimum price) that a third party promises to bid at the sale if other bidding falls short.
In his Wednesday conference call with security analysts, Tad Smith, Sotheby’s CEO, further revealed that “we currently have $217 million in gross guarantees outstanding to consignors” to this week’s sales, he said, “but only $40 million net guarantee exposure after offsetting the risk with irrevocable bids.” A privately traded company, Christie’s customarily doesn’t disclose information about the value of its guarantee portfolio.
With all this pre-orchestrated fiddling with bidding, the air of excitement and spontaneity that used to enliven art auctions has been significantly deflated. Bidders are sometimes up against not only the consignor’s reserve, but also an anonymous third party (usually a dealer or major collector) who has cut a side deal with the auction house to bid for and potentially buy the work at a specified price. This backup bidder is paid an undisclosed fee for the commitment, which essentially means that he pays less for the work than anyone else would have at the same hammer price.
This is the opposite of transparency and a level playing field, notwithstanding the fact that last year the NYC Department of Consumer Affairs began requiring auction houses to publicly report the net price paid after deducting the fee paid to a buyer who was an irrevocable bidder.
With so many results preordained, auctioneers’ theatrical cajoling of bidders has become less art than artifice. If potential bidders are feeling somewhat gamed, it’s because they are.
For the other side of this argument, see Busting the Guarantee Myths by Adam Chinn, Sotheby’s COO.